Rockwell Automation, Inc.

Thank you for holding and welcome to the Rockwell Automation quarterly conference call. I need to remind everyone that today's call is being recorded. Later in the call, we will open up the lines for questions. If you have a question at that time, please press star 1. At this time, I'd like to turn the call over to Jessica Caracos, Head of Investor Relations and Treasurer. Ms. Caracos, please go ahead.

Good morning, and thank you for joining us for Brockwell Automation's third quarter fiscal 2019 earnings release conference call. With me today is Blake Moretz, our chairman and CEO, and Patrick Gores, our CFO. Our results were released earlier this morning, and the press release and charts have been posted to our website. Both the press release and charts include reconciliations to non-GAAP measures. A webcast of this call will be available at that website for replay for the next 30 days. Before we get started, I need to remind you that our comments will include statements related to the expected future results of our company and are therefore forward-looking statements. Our actual results may differ materially from our projections due to a wide range of risks and uncertainties that are described in our earnings release and detailed in all of our SEC filings. So with that, I'll hand the call over to Blake.

Thanks, Jessica, and good morning, everyone. Thank you for joining us on the call today. Before I start, I first want to thank Steve Edsel, who has transitioned from investor relations back to his treasury duties full-time. He has served us well in the IR role for the last few years. I also want to welcome Jessica Caracos as our new head of investor relations. Jessica brings a wealth of experience from both the sell side and buy side, and we're excited to have her on board. With that, let me start with some key points for the quarter, so please turn to page three in the slide deck. Globally, organic sales were up half a percent, lower than we expected. In general, we saw strong growth in our longer cycle end markets, while shorter cycle end markets weakened. Organic sales growth was led by heavy industries, including oil and gas, pulp and paper and mining, as well as life sciences, each of which grew double digits. In oil and gas, we saw strong growth in all regions as our customers are focusing on productivity, improvements, and digitization initiatives. Pulp and paper continued to do well for us, with most of the growth this quarter coming from North America. Strong growth in mining was driven by CapEx investments in iron ore and copper electric vehicle-related commodities, and investments around digitization. Life Sciences was another standout vertical for us this quarter. Our offerings aligned well with industry trends, including personalized medicine and cybersecurity. Offsetting the longer cycle growth in the quarter was weakness in shorter cycle end markets, including automotive, semiconductor, and food and beverage. Automotive was down about 10% year over year and slightly up sequentially versus Q2, in line with our expectations. Semiconductor in the quarter was weaker than expected, impacted by an overall slowdown in the global semiconductor market. Food and beverage was down low single digits. Although the industry continues to focus on modernization to drive productivity, we saw some project delays. Logix was down 3% organically, largely due to automotive weakness. Process control sales grew 3% organically, led by strength in longer cycle and markets. Information solutions and connected services continue to do very well, from double digits in the quarter. This is a measure of the new value being delivered to customers in all industries. This business increases recurring revenue streams and includes FactoryTalk Innovation Suite and MES software, as well as high-value services such as remote monitoring to enhance cybersecurity and optimize production. Commenting on regional performance in the quarter, North America was about flat organically. Pulp and paper and oil and gas had strong double-digit growth while automotive, semiconductor, and food and beverage declined. EMEA was up 2% in the quarter, led by life sciences, oil and gas, and tire. While Asia declined 1%, China grew low single digits. Latin America sales were up 6%, led by mining and oil and gas. I'll make a few additional comments about our Q3 results. Adjusted EPS was up 11 percent, and segment operating margin expanded 130 basis points year over year. The increases in adjusted EPS and segment operating margin include a benefit from lower incentive compensation expense. Patrick will elaborate on our third quarter financial performance in his remarks. Let's move on now to guidance for full-year fiscal 2019. We believe that uncertainty with respect to global trade is impacting some customers' investment decisions, particularly those related to the timing of capital investments. Taking into account our year-to-date results, we now expect our fiscal 2019 organic sales to be up about 1.5% year over year. Including the impact of currency translation, we now expect reported sales be about $6.6 billion. We're reducing the adjusted EPS guidance range to $8.50 to $8.70, which includes aligning spending to the current market environment. As Patrick will discuss in a few minutes, this guidance does not include the impacts of the Centsia joint venture. Before moving on, I want to mention that yesterday, our board authorized an additional $1 billion for share repurchases. A strong financial position allows us to deploy capital in line with our priorities, organic growth, inorganic investments, dividends, and share repurchases. Let's talk a little more about our organic and inorganic investments. Regardless of what is going on in the macro environment, we're confident that we are executing well and we see evidence that we are gaining share and making the right strategic investments to drive profitable growth. Beginning with our core business, we continue to invest in our logics architecture and connected smart products. These enable us to capture a broader set of opportunities across discrete, hybrid, and process end markets. Customers are telling us that our latest generation logics processor outperforms our biggest competitors, It is also the industry's first certified secure controller, adding a whole new level of security on the plant floor. In high-performance motion control, utilizing a highly differentiated independent cart technology, we worked with KUKA to secure a multimillion-dollar order in Q3 from a large global automotive manufacturer, beating European competitors that lack this capability. We're also increasing our penetration within process-oriented end markets, like oil and gas, which continues to show strong growth for us and is the largest automation market. We're going after this market organically by building up our process capabilities both within Logix and our FactoryTalk analytics platform, as well as inorganically through our Sensia joint venture with Schlumberger. The new value from information solutions and connected services is another way to win across all industries. We're already seeing this acceleration in markets like life sciences, where we have grown strong double digits over the last two years and are gaining significant market share. Here, our differentiation in pharma suite MES, cybersecurity, and factory talk analytics have resulted in many recent deals going our way, including a recent win with a very large medical device company against a traditionally strong process competitor, where our offering was seen as the best technology to increase overall equipment effectiveness. Our analytics and MES differentiation also drove a key automotive win in Asia, where our software will be used on top of a competitive control platform. We won because our solution was more reliable, We had deeper domain expertise, and our digital roadmap was better. EMEA and Asia are highly strategic regions for us, and we plan to invest both organically and inorganically to strengthen our reach. These and other wins give us confidence that no one is better positioned to benefit from the global convergence of IT and OT than we are. And we're actively directing spending in our operations, and through capital deployment to the areas of highest return to make that happen. We look forward to speaking in greater detail about these initiatives at our upcoming Investor Day in November. Now I'll turn it over to Patrick to provide more detail around our Q3 results and our 2019 sales and earnings guidance.